Sun Hongbin held onto the support level

Author | Cao Anxun Editor | Zhou Zhiyu After completing a 90 billion yuan domestic and foreign debt restructuring last year, which bought the company 3 years of breathing room, Sun Hongbin, Chairman of Sunac China Holdings, has fulfilled his promise to "strive for a return to a benign and healthy development track by 2023", holding onto his core support. On March 28th, Sunac released its 2023 annual financial report, allowing the public to have a glimpse of its latest financial situation. CICC (China International Capital Corporation) has also directly upgraded Sunac's service rating to outperform the industry, believing that Sunac China's fundamentals have improved, returning to the right track and gradually clearing risks. The financial report shows that Sunac's attributable net loss was 7.97 billion yuan, a significant decrease of 71.2% year-on-year, with interest-bearing liabilities of 277.83 billion yuan, a decrease of 20.59 billion yuan from 2022, effectively reducing its debt. The successful debt restructuring has also to some extent increased Sunac's net assets. After making provisions for impairment totaling over 85 billion yuan in three years, Sunac still has net assets of 83.79 billion yuan, attributable net assets of 62.43 billion yuan, an increase of 3.96 billion yuan compared to 2022, reflecting a solid asset base. "From Sunac's financial report, the asset base is quite solid, with very high-quality assets, especially the growth in attributable net assets, indicating that it has more proprietary capital to withstand risks and uncertainties." said an analyst. Moreover, the above-mentioned person stated that although these high-quality assets have been impaired in the short term, it is not actual losses. When the market conditions improve, inventory impairments can be reversed under certain conditions, helping to boost performance. Specifically, in real estate development assets, Sunac's unsold land reserves are valued at approximately 1.23 trillion yuan, with equity unsold value of 0.81 trillion yuan, with a large layout in core first and second-tier cities. This provides "provisions" and guarantees for Sunac's future sales and receipts. Currently, the industry is gradually stabilizing, and when the market recovers, real estate development assets will unleash even greater potential. According to the CRIC sales ranking, in 2023, Sunac achieved a total sales revenue of 84.66 billion yuan, ranking 17th in the industry, still maintaining a good sales foundation. Sunac's cultural tourism business also performed remarkably well. The financial report shows that last year, Sunac's ice and snow, theme parks, and commercial activities attracted over 150 million visitors, with hotel occupancy rates rapidly increasing. The overall business operation showed a strong momentum, with significant revenue growth. The operating income of cultural tourism projects reached 5.91 billion yuan, a year-on-year increase of 29.9%, turning management profit from loss to gain, with an increase of 1.57 billion yuan year-on-year. "Sunac's cultural tourism business has exploded, benefiting from both forward-looking layouts in hot tourist cities and years of operational system improvement. At the same time, in the wave of the epidemic easing and the recovery of cultural tourism, Sunac has seized the opportunity to effectively resume operations," said an informed source. Sunac's cultural tourism business is the biggest difference between Sunac and other real estate companies. Now, after 7 years of extensive operation, the cultural tourism business, once considered a heavy asset burden, has borne fruit and has good growth prospects Perhaps, in the future, the cultural tourism business will play an increasingly important role in resolving the overall risks of Sunac and smoothing out its revenue and net profit. These high-quality assets provide stable support for Sunac's operational recovery and will be the key to whether Sun Hongbin can weather the industry cycle and achieve brilliance once again. It is worth noting that the auditor Deloitte has given a non-standard opinion on this financial report, which means that after completing the debt restructuring, Sunac still needs to continue to demonstrate a determination to self-rescue with real efforts to promote sales, collection, and delivery of completed buildings in order to gain institutional recognition, stabilize creditors, and investors. Fortunately, currently, real estate companies striving to recover are seeing more light. After the Ministry of Housing and Urban-Rural Development held a deployment meeting for the urban real estate financing coordination mechanism, as of February 5th, Sunac has had more than 90 projects included in the first batch of the "white list," involving 20 cities including Beijing, Tianjin, Chengdu, Chongqing, Zhengzhou, Shenyang, Qingdao, Wuhan, Kunming, Xi'an, Taiyuan, and Xishuangbanna. Sunac is also making efforts to self-rescue. As of March 6th, apart from some projects in the northern region still in the winter break period, Sunac's projects nationwide have resumed work in batches, with over 26,800 production personnel on site, involving multiple projects such as ONE9 in Beijing, Future Financial City in Shanghai, Cultural Tourism City in Chengdu, and Yuxi World in Guangzhou. Looking ahead to 2024, according to insiders, Sunac will launch two new projects in Shanghai, Dongjiadu and Huangpu Yalong, and there will be additional releases for Sunac No.1 Courtyard in Beijing and Future Financial City in Shanghai. The unsold value of just these projects is around 150 billion yuan, which will further support the continuous recovery of Sunac's operations. For the industry, Sunac has proven that distressed real estate companies can gradually recover under their own efforts, which is also an encouraging development for other distressed real estate companies still in the process of self-rescue